Company Voluntary Arrangements (CVAs) - Law - Ineligibility to apply for a CVA with a moratorium
Schedule A1 - Insolvency Act 1986 - Paragraph 4H - Definition of "project company"
A company that has certain specified involvements is not allowed, by law, to apply for a Company Voluntary Arrangement (CVA) with a moratorium. On such activity that makes a company ineligible to apply for such a CVA is a "project company". Paragraph 4H of Schedule A1 to The Insolvency Act 1986 defines the phrase "Project Company" for this purpose.
In essence if a company is involved in a Private - Public partnership on a project then if that business becomes insolvent it cannot propose a CVA with a moratorium. For plain English free advice on the options open to your company please contact us.
The actual wording of Paragraph 4H to Schedule A1 of The Insolvency Act 1986 is reproduced below in bold.
Paragraph 4H - Schedule A1 - Insolvency Act 1986 - Interpretation of "project company"
(1) For the purposes of paragraph 4B a company is a “project company” of a project if—
(a) it holds property for the purpose of the project,
(b) it has sole or principal responsibility under an agreement for carrying out all or part of the project,
(c) it is one of a number of companies which together carry out the project,
(d) it has the purpose of supplying finance to enable the project to be carried out, or
(e) it is the holding company of a company within any of paragraphs (a) to (d).
(2) But a company is not a “project company” of a project if—
(a) it performs a function within sub-paragraph (1)(a) to (d) or is within sub-paragraph (1)(e), but
(b) it also performs a function which is not—
(i) within sub-paragraph (1)(a) to (d),
(ii) related to a function within sub-paragraph (1)(a) to (d), or
(iii) related to the project.
(3) For the purposes of this paragraph a company carries out all or part of a project whether or not it acts wholly or partly through agents.
Paragraph 4H of Schedule A1 of The Inolvency Act 1986 is another bit of insolvency law written in complex language. From the above it is apparent that it can take an age to just interpret even the defnition of "project company". If you wish to receive free advice on whether or not your company is eligible to apply for a CVA with a moratorium or on any insolvency question please contact us.